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US consumer prices eagerly awaited

A stronger-than-expected rise in US producer prices has heightened tension ahead of today's release of US consumer prices. If inflationary pressures continue to build in the world's largest economy, it is likely to further delay the Federal Reserve's initial easing of interest rates. 

Alessandro Fezzi, LGT
Reading time
5 minutes
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In the US, producer prices rose more than expected in April. On a yearly basis, producer prices rose by 2.2%, compared with 1.8% in the previous month (revised down from 2.1%). Compared with the previous month, producer prices rose by 0.5% (consensus: +0.3%). Excluding energy and food prices, the core rate was 2.4% y/y and 0.5% m/m in April. A rise in producer prices usually has a lagged effect on consumer prices. If these come in higher than expected this afternoon at 14:30 CET, hopes of an imminent easing of monetary policy in the US are likely to fade.

In New York, stock indexes continued to rise slightly in quiet trading on Tuesday. The Dow Jones Industrial closed up 0.3% at 39,558.11 and the S&P 500 closed up just under 0.5% at 5,246.68. Indices on the Nasdaq technology exchange were up around 0.7%. The Nasdaq Composite Index even reached a new record high. Shares of electric car manufacturers continued to be in focus, benefiting from the US government's announcement of special tariffs of 100% on electric cars from China. Shares in Oracle, the US software and server provider, also rose strongly, gaining almost 4%. According to media reports, Oracle is in talks with Elon Musk's AI company xAI to lease computing power.

The US government's announcement that it will impose special tariffs of 100% on electric cars from China is causing a stir. Washington has also announced new or significantly higher tariffs on solar cells, semiconductors and medical products. The Beijing government has accused the Biden administration of campaigning at China's expense. China will take resolute measures to defend its own rights and interests, it said. The European Union is also investigating the extent to which China is distorting the market for electric cars and whether it should respond with punitive tariffs.

Asia-Pacific markets were mostly higher on Wednesday, tracking gains on Wall Street. Meanwhile, China's central bank left its one-year medium-term lending rate unchanged at 2.5%, as expected. Mainland China's CSI-300 index fell around 0.5%, while markets in South Korea and Hong Kong were closed today for a public holiday. In Australia, the S&P/ASX 200 was up almost 0.5% and in Tokyo the Nikkei 225 was up around 0.7%. Yesterday, Japanese electronics and entertainment group Sony reported a drop in operating profit due to weaker business with the PS5 games console and disappointed with its profit targets for the current year.

Corporate news in focus: ABN Amro, Allianz, Merck KGaA, Commerzbank, ThyssenKrupp, Burberry, Cisco.

Economic data in focus: Swedish consumer prices, French consumer prices, Dutch GDP, Eurozone GDP and industrial production, US consumer prices and retail sales and the New York Fed's Empire State manufacturing indicator.

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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